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Apr 16

Fractional Reserve Banking & the Bitcoin Crypto Economy

By Timothy W. Robinson and Tony Willenberg

Abstract: The relationship between monetary economics and cryptocurrency is as yet unclear. Since the Great Recession of 2008 the world order has been described as operating under a new Keynesian economics. This paper examines how central banks use fractional reserve banking (FRB) combined with market factors to stimulate or suppress aggregate demand through the money supply, a fundamental Keynesian tenet. The economic and operational functions of a central bank are, however, viewed through the lens of the Bitcoin crypto economy which has no such centralised structure or mechanisms. The closest artefact is Bitcoin’s consensus behaviour embodied in a shared algorithm. It is asked and answered would FRB organically emerge in the Bitcoin crypto economy if cryptocurrency exchanges were to act like fiat currency depository institutions.

Introduction

1. The relationship between classical monetary economics and cryptocurrency is as yet unclear. The Bitcoin crypto economy whilst occasionally challenged in the court of public opinion, and despite setbacks, shows no sign of yielding since its advent in 2008. At the time of writing the Bitcoin crypto economy was worth $US16 billion or equivalent to the 153rd richest country, and growing. The currency is used in an estimated 275 thousand transactions per day [1]; a value which has been increasing progressively as the currency gains wider adoption.

2. The typical dynamics of fractional reserve banking (FRB) and the primary role of a central bank don’t fully apply to cryptocurrencies for three reasons. First, cryptocurrencies are decentralised and self-managed and so there is no need for a central banking institution per se to actually govern the cryptocurrencies. Second, there is no need for a banking institution to facilitate or intermediate transactions over great distances, or in large volume. Third, there is no need for a deposit. Personal crypto security measures are potentially sufficient to secure a small amount or a large amount of bitcoin, equally as well, making the security of a bank unnecessary.

3. Given that the function of cryptocurrency is to approximate fiat cash without the need for either deposit-taking banking institutions in the typical sense or a central bank, is FRB an obsolete mechanism within the context of crypto economies?

Fractional Reserve Banking Explained

4. FRB is the intentional quarantine of a proportion of a commercial bank’s deposits into a reserve account, held by a central bank, or currency held at the bank; whilst using the remainder for commercial activity of the bank, to lend out make profit [2]. It is unclear where the practice first emerged, but would have existed prior to the establishment of central banks or even Government oversight or interest in the banking system. The central bank oversight mechanism likely began with the world’s first central bank, the Bank of Amsterdam established in 1609 [3].

5. FRB came about as banking institutions began to realise that they did not require actual cash to meet all withdrawals customers could potentially make at once. Further it ensures that fiat currency is not effectively taken out of circulation from an economy and can instead be put to work, by magnifying the base money originally created by the central bank. Banking institutions realized that they only need to maintain sufficient levels of reserves to mitigate the risk of simultaneous withdrawals, and that the rest of the funds on deposits could be put to work.

6. Banking institutions have a number of mechanisms under the current system to try to meet liquidity requirements including their reserves; the interbank market; lending windows from the central bank etc. The degree to which FRB leads to money supply creation then depends on the degree to which the banking institution feels it can lend out its reserves while still allowing people full access to their deposits.

The Role of a Central Bank in FRB

7. The role of a central bank is the development and usually the implementation of monetary policy: which typically occurs through lending windows, open market operations, and potentially even auctions, base money management and the reserve requirement (albeit primarily in emerging markets [4]). Although the latter are typically less utilised [5]. Central banks have moved generally towards operational targets (i.e. something within their control day-to-day) of short-term interest rates and away from things like reserve requirements [6].

9. Decisions by banks on investments are also heavily influenced by international and country-wide regulatory requirements, for example, under the Basel III banking supervision framework, capital adequacy ratios (CAR) are well-defined. CARs determine the proportion of loans a bank can make relative to its risk-weighted assets. The need to maintain CARs determines the degree of profitable lending opportunities for the banks, and thus the “opportunity cost” of reserves. Therefore, even regulatory ratios on asset composition can determine the degree to which funds are on-lent in a monetary system.

Understanding the Bitcoin Monetary Base (‘C0’)

10. Let us explore what Bitcoin is and how it works. It is important to know this before we can consider how FRB might work and arise in a crypto economy and more importantly whether FRB is needed for improved economic outcomes in a crypto economy.

11. Bitcoin is the world’s first decentralised digital currency, built on cryptographic techniques to control the generation of units of the currency, to verify the transfer of funds from one person to another, and to operate independently of a central bank. Bitcoin is virtual currency in that it is not represented by a physical token*, and is not backed by or pegged to the value of another underlying physical asset like gold or a unit of an existing fiat currency.

(* There have been a number of attempts to provide a physical representation of bitcoins but these are not the predominant representation of the cryptocurrency held by participants in the Bitcoin crypto economy. See: Casascius, Alitin Mint, Cryptmint Coins, and Titan Bitcoin.)

12. The Bitcoin cryptocurrency is implemented through a globally shared and distributed ledger of transactions representing Bitcoin events in its economy stored on a data structure called the blockchain [8]. Events recorded on the blockchain are either: (a) new bitcoin minted into supply (referred to as “mined”), or (b) bitcoin traded between parties (“transacted”). The blockchain contains the history of every single bitcoin from when it was mined to whom it is presently owned by, and the blockchain data structure exists in hundreds of thousands of computers simultaneously, each copy synchronising itself with other “full nodes” (the name given to computers the Bitcoin Core open source software, are connected to the Internet, and hold a complete copy of the global blockchain).

13. The total supply of bitcoins in the Bitcoin economy (what we have termed ‘C0’), by design, is set to never exceed 21 million bitcoins and the number of bitcoins in circulation increases gradually according to an algorithm. At the time of writing there were just over 16.2 million bitcoins in circulation out of the possible 21 million [9]. The limit of bitcoins mined into existed is expected to be reached sometime in the year 2140 [10]. A bitcoin is also presently divisible into 2 x 10–8 smaller units, known as “satoshis”, which means that at the upper limit there would be 2 x 1014 units of money, or 2.1 quadrillion units.

14. Bitcoins are brought into existence by an algorithm embodied in the Bitcoin Core open source software running on “full nodes” and the process is referred to as “mining”. Each computer in the Bitcoin ecosystem must run either: (a) a basic wallet application (to receive and send bitcoin) or (b) run a “full node” (that mines blocks and validates transactions).

15. Mining bitcoin means about solving a mathematical puzzle, one that can only be solved using brute computer force [11]. Once a full node solves such a puzzle two things occur: (i) the computer has generated an empty block (think of it as a blank page in an accounting ledger) and for which it earns a mining reward (at the time of writing, 12.5 bitcoins or roughly US$13,000), and (ii) it has earned the status of an ‘honest node’, through its proof-of-work. The proof-of-work (solving the puzzle) represents a vesting of interest in the network remaining honest. An ‘honest node’ then gets to examine queued transactions in the network and earn further transaction fees from each transaction on the ledger page (block) they validate. Validating transactions means checking that the transactions parties own the bitcoins they are transacting and that the cryptographic integrity of the transaction is intact.

16. Once these transactions are validated, they are encoded onto the block and chained to the global blockchain and the new state of the blockchain is then propagated throughout the Bitcoin network. There are a number of other rules and behaviours for resolving conflict, rejecting invalid transactions, and arriving at a consensus, but the above describes in broad terms the process that drives the Bitcoin ecosystem.

Depository Institutions to Cryptocurrency Exchanges

17. Wallet software is used to generate the “addresses” used to receive inbound bitcoin from a sender. One or more addresses are created for receiving Bitcoin and these addresses are (the “hash” of) the public key side of a public-private key pair. The private key is known only to the receiver and is also cryptographically linked to the public key. A recipient of bitcoin can prove they own the bitcoin sent to their address (effectively the public key) because they know the private key linked to that public key. Lose the private key and one loses the bitcoin associated with the public key.

18. Addresses are meant to be used only once, to preserve the anonymity of the receiver by preventing patterns from appearing on the blockchain associated with duplicate public keys, Reuse of an address is considered a cardinal breach of personal crypto security in blockchain applications. A sender’s address is never recorded on a transaction on the Bitcoin blockchain. The premise is if a valid transaction makes it to the blockchain then the sender had bitcoin to send because the sender had access to the private key associated with the public key where bitcoins were located (having arrived there from earlier validated transactions).

19. Bitcoin is acquired by someone in one of two ways: (i) either they themselves have mined the bitcoin (solving puzzles and then earning transaction fees for validating transactions), or (ii) they received it through trade (presumably for something of equivalent value). By trade it means that someone can trade another fiat currency or even another cryptocurrency for a sum of Bitcoin. Like any currency exchange point, reserves of one currency can be exchanged for a sum of Bitcoin. At the time of writing, a single bitcoin was worth US$1,173 on the third largest cryptocurrency exchange, Kraken [12].

20. The most infamous of cryptocurrency exchanges was Mt. Gox, an exchange based in Japan which began as a web site for game card trading and was then re-purposed for trading bitcoin in 2010. The exchange was plagued by problems (primarily related to poor corporate governance) but its trade volumes rose to a peak that accounted for almost 70% of all bitcoin transactions by 2013. By February 2014, however, the exchange suspended trading and filed for bankruptcy. It announced in the filings that around 850,000 bitcoins had gone missing or had been stolen from the exchange. Since the fiasco, some 200,000 bitcoins have been recovered, but to this day, a number of people remain who lost all of the bitcoin that was being held on their behalf by Mt. Gox.

21. Mt Gox provided a hosted wallet service. These wallets held bitcoin on behalf of the customers. The company was also a miner of bitcoin, deploying large numbers of applications-specific integrated circuits (ASIC) to the mining problem and then accruing the bitcoin rewards from the mining process. Finally, Mt Gox was also an exchange, providing a point where fiat currency could be exchanged for bitcoin and vice-versa. When it failed all three repositories of bitcoin were affected: those held for customers in web wallets, those it owned itself as a result of its mining operations, and the reserve of bitcoins held to enable interchange.

22. Today, cryptocurrency exchanges are better managed and although they are not specifically regulated, it is increasingly common for exchanges to be attached to commercial banks, which are heavily regulated in most jurisdictions around the word. The three largest exchanges: Quoine (Singapore), Bitfinex (China) and Kraken (US); all abide by international Know Your Customer (KYC) and Anti-Money Laundering (AML) practices just as a commercial banking institution would.

How Would FRB Work in the Bitcoin Crypto Economy?

23. There are two specific questions asked herein: (i) would FRB emerge naturally in a crypto economy; and (ii) is there a role for a central bank in a crypto economy whether FRB were to emerge?

24. Let’s first think about FRB and central banks with our well established fiat monetary systems. As discussed above, many decisions in modern banking are influenced by monetary policy and based on central bank-controlled interest rates, rather than as a function of “hard” limits (like reserve limits) set by a central bank. The interest rate the central bank pays out on reserves, for example, acts to incentivise bank behaviour. Banks themselves will make decisions on lending based on the lending opportunities in the economy, and the profit they will generate when compared to the rate earned holding reserves, or the potential cost of acquiring liquidity.

25. This does not imply that if a central bank were to pay a zero rate or even negative interest rates on reserves, that banks would have no incentive to hold reserves: banks hold reserves not just for the returns, but also for safety and to meet customer needs. Contrary to the simplified description in economic textbooks, the money multiplier cannot be thought of as just 1/RR (1 divided by the Reserve Requirement) as discussed above. Other factors must be included in the calculation, including an assessment by the banks on the need to hold liquid reserves to meet withdrawal obligations; and the available returns on other investment options (which in part is also determined by rules on capital assets and risk).

26. From this we can see that it is not necessary for the existence of a central bank for fractional reserve banking to occur in a crypto economy [11]. Banks have limited profit incentive to lend out all reserves, and certainly no incentive to hold 100 percent reserve coverage, unless they are paid an explicit fee for the service. It’s a balance between being able to lend in the market a proportion of your cash and earn income, and being able to secure the other portion holding it in reserve.

27. In a hypothetical scenario where Bitcoin was used as the primary, or sole means of exchange, we could have a money supply which relied neither on a banking system (to process payments and secure funds) nor a central bank (to act as a clearing system). These two functions is what we will refer to as the operational functionsof the banking system, as opposed to the economic functionsof the banking system. Economic functions relate to their role in the stimulation or suppression of economic activity, a fairly established role [12], and the provision of individual economic benefits (investment opportunity, creation of credit, etc.) [13].

28. Examining the process of money creation by looking at the transactions that occur on a set of banks’ balance sheets, the settlement of a loan for the purchase of a house, in the below diagram, shows the creation of a loan, and the corresponding deposit to the account of the borrower. If the bank does not have sufficient reserves to cover likely withdrawals or new loans they will both seek to retain deposits, and secure new deposits to maintain capital adequacy.

Figure 1: Modern money creation.

Source: Adapted from “Money Creation in the Modern Economy”, Bank of England.

Bitcoin for Operational Banking Functions

29. Bitcoin removes, in part, some of the need for the operational role because the clearing and settlements system can happen automatically and across large distance, in much the same way it would for a fiat currency over short distances (i.e. with cash transactions). When one transacts in a shop and parts with physical cash the “accounts” of both parties are settled immediately. In Bitcoin this same mechanism occurs, but over any distance and for any scale of transaction. This would be the case for simple wallet-to-wallet transactions.

30. The security over Bitcoin wallets, however, still poses a major obstacle to Bitcoin going mainstream. Personal crypto security practices are just not sufficiently mainstreamed in the general population at this time, and may never be. One could ask if this is a similar juncture in economic history to the time when credit cards were not well understood on main street and even today credit card companies bear the burden of the cost of protecting consumers with credit card charges and insurance schemes. With Bitcoin, the loss of a private key (by forgetting a passphrase, say) means loss of the bitcoin assigned to the counterpart public key.

31. The wallet however remains, despite perception, still potentially more secure than a physical wallet. Therefore, the need for the physical security of funds is reduced, albeit not entirely — it is likely significant quantities of bitcoin stored in a single wallet, regardless of how safe, would never be completely trusted. It is also worth noting that not only individual wallets, but also wallets left with other institutions (e.g. Coinjar, Bitcoinica, Input.io, etc.) and even insured wallets are at risk. The system, as currently in place, requires individuals to make either their own security arrangements, or invest significant time determining the reliability of entities that secure or insure their bitcoins. Personal crypto security is critical. Lose your private key and one loses their bitcoins. Personal crypto security is a significant new area of consumer literacy and companies like Circle Internet Financial and Xapo are addressing these issues to mainstream them [8].

Bitcoin for Economic Banking Functions

32. The economic functions of a banking system can be thought of as being separated into their role in the provision of investment opportunities to investors (as both an investment opportunity themselves — i.e. through the payment of interest on deposits; and in their role as a facilitator for investment — i.e. in helping people invest in equities, bonds, etc. Primarily they function to aggregate deposits providing the “missing link” between firms wishing to borrowing large sums and lenders wishing to invest small [14]). This latter role would be consistent with a Bitcoin system which would operate without FRB — the only role the bank would play would be effectively a “matching function” — helping an investor connect with an investment option for a fee. This would not suffice to create additional money, since the entire value of the funds a person wishes to lend is passed along to the borrower immediately and directly (that is the very nature of a bitcoin transaction), and the lender loses access to it. The lender acquires an asset, in the form of either shares or a loan, and the borrower acquires funds. No deposit is retained. In the former role, the bank acts as a mechanism to gather together often smaller volumes of money, into a more efficient investment, and also absorbs the liquidity risk from individuals. This former mechanism however would require some form of FRB.

33. We see then two conclusions: (1) the power of the banking system to create money is an extension of its role in taking and creating deposits, and (2) the reason for the taking of deposits has functions and incentives beyond just the purely operational benefits. Therefore, even in a circumstance where the need for the operational role is removed or reduced by the use of Bitcoin, there is still a need for them to play a role in finding the most efficient investments, and providing a simple investment opportunity for individuals; which is potentially sufficient for the creation of deposit taking institutions, so FRB would naturally emerge.

A Model of FRB in Bitcoin

34. In order for Bitcoin to operate with a fractional reserve banking model we would need to postulate: (i) depository institutions (beyond the model used for organisations like Mt. Gox which take possession of a bitcoin wallet), and (ii) bitcoin denominated borrowing. The former would not likely materialise for operational reasons, in a system in which Bitcoin is the primary means of transaction, but for economic ones.

35. Simply put, should one wish to extend bitcoins from their personally held wallet to another individual, one would need to: (a) incur a cost to determine whom to lend to; (b) incur administrative costs in joining with other lenders to pool to then have sufficient funds to provide the loan; and (c) take on the liquidity and loan risk oneself.

36. The lending operation itself would then require one to transfer bitcoin from their wallet to the borrower’s and using the smart contracting mechanism of the Bitcoin protocol, albeit rudimentary, to create the repayment transactions according to the agreed terms, while simultaneously linking in a ‘sidechain’ representing the details of outstanding debt value (what the borrower owes the lender at any given point in time). This can be thought of as analogous to lending in cash; without any banking institution.

37. It must be remembered at this point that the Bitcoin protocol does not hold a shared ledger of balances. The balances of an individual are simply the aggregation of bitcoin addresses to which they hold a private key. Those bitcoin addresses they possess, are to where bitcoins are sent by other bitcoin holders. The “repayment ledger”, i.e. what is owed back from the borrow to the lender, would like need to be stored in a sidechain or what is referred to as an off-chain mechanism or in automated rules that run on the blockchain (in what is referred to as the virtual machine component of the blockchain ecosystem).

38. It should also be noted that the very nature of the Bitcoin protocol is that it solved the difficult double-spend problem. In the same spirit, the value of bitcoin loaned from one person to another would need a mechanism to signal that although this address received bitcoin, that the bitcoin was consideration granted under a loan and the nature and terms of the loan would need to be potentially side chained to the address that received the proceeds of the loan. Sidechaining is the process of linking additional transactional data to a bitcoin transaction using the same cryptographic relationship as those in the blockchain data structure underlying the Bitcoin protocol itself. In our example here, the related information would signal that this a loan repayment schedule or loan agreement and the encompassing terms and conditions of the loan would need to be attached. In this sense some of the other operational roles of the banking sector (i.e. recording amounts due; loan terms, etc.) can be undertaken through bitcoin with either a sidechain mechanism or an Ethereum like virtual machine contract (another way of saying a loan contract that lives on the blockchain as part of the original transaction).

39. The creation of a bitcoin depository institution would create, as it does with fiat currency, economies of scale to lending. While some of the above search and matching costs can be reduced through aggregation via a fee-taking institution for bitcoin (or smart contract on the blockchain), the liquidity risk management functions, and even some lending risk management functions cannot be so easily implemented. Which again reiterates — there are benefits to deposit-taking institutions in a Bitcoin universe, even beyond the operational.

40. Handing over the Bitcoin wallet for protection or aggregation (in the manner of Coinjar) would be similar to, under current banking systems, placing funds in a safety deposit box instead of a deposit account. Bitcoin exchanges earn their income from fees. If the former has advantages however, then the latter must — given the former only provides security and no economic benefit. Anything lent out from the wallet (or safety deposit) would therefore reduce access. Put simply: if one lends out funds from their safety deposit box one can no longer access those funds until they were repaid, vastly different from a bank that lends out funds (sourced from an aggregation of funds from numerous deposit holders’ accounts).

41. Theoretically, then, there is no difference between fractional reserve banking for a fiat currency and that for a cryptocurrency. If the Bitcoin acts as the base currency, and there is still incentive for the existence of deposits in circumstances where people receive a deposit in exchange for Bitcoin — as in paragraph above (i.e. banks would need to hold a portion of the bitcoin to meet likely withdrawal demands). Bitcoin merely acts as a more useful form of base money because of the in-built security, span of distance for transactions, and rapid settlement times (relatively to fiat currency transactions intermediated by today’s global banking system).

42. It is however worth noting that this has two additional effects. First, the benefits are now largely economic, not operational, to having deposits that can be accessed at any point, although the operational ones exist. Second, institutions unlike the current set of “depository” institutions for bitcoin would have to arise and would likely do so organically in the current system.

Would this Require a Central Bank?

43. A central bank provides a similar split of operation and economic roles [15]. Its operation functions include, although they vary country to country: its role in the clearing and payments system; a printer of currency; lender of last resort; banking supervisor and regulator, and providing government banking services. Its economic role extends to monetary stability; controlling inflation and influencing growth (and sometimes an economic development role, too). Some of this role can be taken on through the Bitcoin protocol; although with amendments and additions. The transfer of funds, for example, could be made from one bank to another bank immediately through their wallets, without the need for a central clearing and settling of the transaction (like The Federal Reserve in the United States operating a clearing system called the Federal Automated Clearing House (FedACH)).

44. It is worth noting that the banks are likely to see a greater potential risk with no access to any central bank lending facilities meaning they are likely to want to maintain greater reserves given that the cost of acquiring shorter term liquidity will be higher. As a result both (a) deposit interest rates are likely to increase, and (b) lending is likely to be lower and at higher cost than that of a fiat currency system.

How does Central Banking fit with Bitcoin?

45. Practically, there is a big difference. Without regulation and an authorised central actor in the Bitcoin economy monetary policy is effectively controlled by an algorithm — the controlled supply of bitcoin by mining. In which case, what then does monetary policy mean in a crypto economy? Is there such a construct in a decentralised crypto economy?

46. Today’s cryptocurrency institutions (what are referred to as the cryptocurrency exchanges) could, in theory, immediately begin lending out the majority of the bitcoin they hold on deposit with the remainder being the fractional reserve amount. However, without a central bank or similar for the Bitcoin cryptocurrency, the cryptocurrency focused on in this paper, there would be neither a lender of last resort to provide emergency liquidity to the system, nor a centralised oversight and regulatory body. This lack of any centralised system of assurance would likely make any deposit taking institutions arising out of Bitcoin of higher risk — in much the same way as the current bitcoin institutions are seen.

47. One could say that to even suggest the introduction of such a centralised authority in the crypto-economy is likely to be met with intense resistance from the Bitcoin movement, who view the cryptocurrency as an expression of libertarian principles, satisfying a need for a currency free from the control of the state and other third parties, such as commercial banks [8, 9].

48. So, one could think of the cryptocurrency held in exchanges as, effectively, base money held out of circulation and the Bitcoin crypto economy as operating without the multiplier effect of FRB at work, operating with only base money. Further, the economy operates without the monetary policy control mechanisms to adjust and target base and higher monetary aggregates that fiat currency possesses, instead relying on a single algorithm.

49. There is an historical analogy for these circumstances: in the period starting the late-1830s and ending around the 1860s the US saw the creation of multiple “free banks” — banks issuing their own currencies, backed by gold or other metals and providing demand deposits. Increasing utilisation of the banking system led, during this period, to the creation of the New York City Clearinghouse, to allow banks to settle accounts and exchange funds [16].

50. It was not until 1913 that the US created the Federal Reserve system, following a series of banking crises [17]. With the signing of the Federal Reserve Act by Woodrow Wilson, a new decentralised system of central banking was created. The system was created from 12 Reserve Banks (splitting the country into 12 zones), and a single Federal Reserve Board, and Federal Open Market Committee. While the creation of these structures was in part necessitated by the existence of fractional reserve banking it did not pre-date it. Fractional reserve banking necessitated the creation of these structures to stabilise the system, as well as other aims.

51. If we have sufficiently demonstrated therefore that even under a Bitcoin-based economy we would still likely see the formation of deposit taking, in the traditional sense of a deposit slip, institutions who would lend out deposits while maintain depositor access to them because of the individual economic benefits, then it is not a significant step to state that such a system would eventually likely need a support and regulatory infrastructure, which could be institutional or algorithmic (the latter being more likely).

Conclusion

52. In their current form digital currencies may be better thought of as digital commodities; and the current institutions of “deposit” for bitcoin are more akin to a Fort Knox, albeit with less of a track record on security. Instead of approaching Bitcoin from the point of view of how it resembles a currency and whether or not it meets the three primary criteria to function as a one (store of value; medium of exchange; unit of account), we have instead adopted the premise that Bitcoin is a currency and then asked now what?

53. The discussion set out here adopts a simplified assumption that Bitcoin is a currency and is the primary (or only) medium and then considers whether it is likely that FRB (and expansion of the crypto-monetary base or a C0) and therefore a central banking system would organically follow, whether physically or embodied in algorithm.

54. Our conclusion is that the same elements of a central banking and monetary system would emerge, in the case where Bitcoin was used as the primary means of exchange, deposit and loans, but that these same elements potentially make it less likely that Bitcoin would become a primary means of exchange: despite the benefits of both transactions of any size over any distance, these same benefits exist in the current system, and the current system has the added benefit of allowing economic returns without significant search costs.

55. While Bitcoin would likely generate some of these benefits as the structures we examine emerge over time, it is likely that while taxes remain paid in fiat currencies and volatility of Bitcoin remains high, there would not be a significant switch over; quite aside from the difficulties with using a token instrument that requires high degrees of personal crypto security. Also, the very features needed for FRB to occur with Bitcoin, i.e. exchange of the contents of a Bitcoin wallet for a deposit slip, and its existence within some form of structured banking system, are antithetical to those who currently use the system [18].